Financial Inclusion in India
In the last couple of years, India has witnessed important developments that have significantly impacted the delivery of financial inclusion (FI) services right up to the grassroots. The term “financial inclusion” has gained momentum in past few years, as a result of findings about ‘financial exclusion and its direct correlation to poverty’. With that, achieving FI became a common objective for many central banks and Governments among the developing nations.
In India, the big push came on April 26, 2010, when Reserve Bank of India (RBI), as a part of its FI mandate issued guidelines to Banks for delivery of financial services through the Common Services Centers (CSCs). The RBI in its Annual Policy Statement for the year 2010-11, allowed banks to engage companies (excluding Non Banking Financial Companies (NBFCs) registered under the Indian Companies Act, 1956, as Business Correspondents (BCs) in addition to individuals/entities permitted earlier. Further, the RBI allowed banks to engage the Common Service Centres’ Operators / Village Level Entrepreneurs as BCs.
Further, February 15, 2011 was another landmark day, as Swabhiman Scheme was formally launched. The objective of the Scheme being “Make banking facility available to all citizens”. Besides this Government of India, Department of financial services issued instruction to Banks to appoint CSC as the business correspondent. Specifically, these initiatives and some other related developments set in motion the financial inclusion agenda in the country.
In order to provide the much needed thrust a flagship programme in mission mode called the Pradhan Mantri Jan- Dhan Yojna (PMJDY) was launched by Hon’ble Prime Minister on 28th August 2014. With this launch, The Bank Mitr / Banking Correspondent Agent (BCAs) at the Grass Root level has now become the extended arm of the Banks, these BCAs have a vital role in successful implementation of Financial Inclusion and PMJDY.
Financial Inclusion through Common Services Centers (CSC) Scheme
Financial Inclusion is an Integral Part of the CSC ecosystem with a clear focus on Banking for the unbanked
The Common Services Centers (CSC) Scheme is being implemented across the country under the Digital India initiative by Department of Electronics and Information Technology (DEITY), Ministry of Communications & Information Technology, Government of India. The aim of the Scheme is to provide sustainable digital access to make e-governance services for upliftment of rural community. The CSC Scheme is a strategic cornerstone of the Digital India initiative of Government of India.
As on Mar 2015 over 1.44 lacs CSCs have been set up across the country, covering 35 States/ UTs. One CSC caters over five to six villages. The CSCs are being set up in the Public Private Partnership (PPP) mode. The CSCs are delivering various services which include Birth, Death, Caste, Income, Domicile Certificates, NREGA services, Health services, Banking & insurance services, e-learning/digital literacy and Telemedicine.
The Scheme is being implemented through a Public Private Partnership (PPP) model. Some of the key stakeholders in the project include the Central Government, State Designated Agency (SDA), Service Centre Agency (SCA), Service Providers (SP), Banks, and the Village level Entrepreneur (VLE)
The Facilitator: Role of CSC SPV
As envisaged under the Scheme, a National level Special Purpose Vehicle (SPV) has been formed as a permanent entity to provide ongoing support to the CSCs and to catalyze services to be channelized through the network. CSC SPV is called CSC (e-GOVERNANCE SERVICES INDIA LTD).
The CSC SPV is playing a proactive role in ensuring that the national network of CSCs is leveraged to meet India’s financial inclusion mandate for rural areas by enabling the issuance of standardized guidelines for Government Scheme linkages, enabling processes for State Designated Agencies (SDAs) to take action and intervening in regions where SCAs are unwilling to enable financial inclusion.
Leveraging CSCs for Delivering Financial Services
As per the RBI guidelines, FI has become a mandate for all banks. Clear targets have been assigned as part of their Financial Inclusion Plan as also approved by the RBI. Consequently, the Banks have signed BC agreements with various service providers to deliver financial services.
Further, CSC SPV as a corporate Banking Correspondent has signed agreement with 42 Banks (Public Sector Banks, Regional Rural Bank and Private Sector Banks) to enabling CSCs to become Banking Correspondent Agents / Customer service points that deliver various banking and financial services in a number of States across the country. CSC SPV is also supporting the State Designated Agencies in States in proactively supporting these initiatives, thereby increasing the sustainability of these initiatives.
Also as per a letter issued by Department of Financial Services (DFS) to Banks regarding Financial Inclusion Strategy and Guidelines, it was clearly stated that “In order to ensure convergence and to assist viability of BC, it would be necessary that in the villages to be covered, wherever a CSC exists, the CSC is made a BC.” Thus in view of the advantage that the CSCs enjoy due to their location, accessibility and availability of ICT infrastructure it is best poised to deliver financial services in rural India.
Role of the State Government in promoting financial inclusion through CSC many states have decided in the State level Bankers committee meeting to monitor the financial inclusion targets assigned to banks and also that all the EBT in the state shall be disbursed through the CSC.
Financial Literacy by CSC:
In light of the importance of the financial inclusion agenda for the country, and to highlight the role CSC network needs to play, various banks organized workshops at state and district level to accelerate delivery of financial services through the CSCs. The idea behind organizing the workshop is to get together all stakeholders on one platform in order to highlight the status, success stories (of people from the ground the VLEs and SCAs), gaps in delivering financial services, and defining the road ahead and deliverables.
VLE Case Studies:
Initial implementations indicated that when banking is linked with disbursement of rural Government scheme benefits and wages, a BC can earn a minimum of Rs. 3000 per month, per CSP. Currently many VLEs are earning more than Rs.20, 000/- per month.
Defining Success Parameters:
The success of financial inclusion depends on the availability of internet connectivity, VLE training and motivation, linkages with Government schemes disbursement, community awareness and sensitization and VLE selection.